Hi BH's,
Thank you for all the help in the past and my endless posts and nervousness on my individual stock portfolio "mistake" of $114,000 total value. I'm a 60/40 37 year old who is all in on the three fund portfolio. All dividend reinvestments are shut off. My tax bracket is low this year and will probably never be this low again due to a maternity. I am having A LOT of emotional trouble selling these to convert to index funds. Currently any dividends I get I just buy VTI or VXUS in equal amounts. When I purchased each stock I used to like make a two sentence comment on why I liked each.

1) Please rip apart my sentences if you would like
2) Would you do a full sale to convert to index funds?
3) Would you continue doing what I am doing by leaving it and reinvesting into index funds from here on in?
4) How about selling the cost basis and letting the profits run? A bit of a compromise?
5) Any other comments from others who can share their experience who had the same "problem".

Thank you.

Here are my holdings.

Dunking Donuts ( Every morning half of my students in first period have there products)
Waste Management ( Population is growing and creating more junk )
Deere ( Population is growing and these people need to eat )
Alibaba ( I don’t play lottery so this is my lottery ticket to possible next Amazon )
Apple ( My students have been addicted to their products for years )
Starbucks ( If they have convinced the USA to buy 5$ coffee maybe they can convince China to do the same)
Mastercard ( I hardly ever spend cash and think society will eventually be paperless )
Visa ( I hardly ever spend cash and think society will eventually be paperless)
Home Depot ( When talking to people they will usually instead of saying “I’m going to the lumberyard” they say “I’m heading to Home Depot”. Plus people will always be fixing or buying new homes or both)
Diageo ( People will consume alcohol in good times and bad )
Markel ( This is my mini-berkshire for an insurance stock )
Nike ( Great products and my students always have their clothes/shoes on for years)
Berkshire Hathaway ( tax efficient and diversified)

I agree with toons...you'll know. I'll throw out a couple of ideas that may help you decide, but they won't work for everyone. I can't say definitively but I think most who buy individual stocks will tell you that the "sell" decision is harder than the "buy". If it were me, a lot of the decision would be based on how much gain/loss each have & also how different your tax situation would be after this year. For example, IF you have a large long term capital gain & you'll qualify for 0% long term cap gain tax, think of how you'd feel if instead you were paying 15%.

Other ideas: 1) Did you have criteria for when to sell when you bought? If so, has it been met?
2) Use an online chart to compare how your stock did compared to what it would have been if in the index. Trending up or down? how does that make you feel?
3) If you have any losses, I might wait until you have more income to offset
4) Are you comfortable issuing covered calls?
5) What about using appreciated shares for charitable giving?

Clearly, some of this is more emotion than not & some of it is "how" you divest yourself of them instead of "if". Good news is that you've done well so far & no reason to think you won't going forward

The question to ask about each individual stock is not whether it is a good company, but whether it is a good investment at the current price. Apple is a very profitable company, but if you sell me your Apple shares, I also know how much business Apple does and how it is growing, so I will pay a high price for the right to those profits. Unless you know something that I don't, there is no reason for you to hold more Apple stock than for me.

And you may actually know something that I don't: how much in capital gains can you take without a tax cost? (Make sure that you understand all of your taxes; don't take a capital gain which would cost you the earned income credit or saver's credit.) As long as you don't have too much in any one individual stock or industry, holding small amounts in a few stocks doesn't hurt your portfolio much, for the same reason that it doesn't help. Therefore, it's fine to keep individual stocks which would be costly to sell.

None of your explanations justify why the stock will outperform the value set by those far more knowledgable than any of us; it takes more than picking successful businesses. Keep taxes in mind but sell asap. You aren't thinking about your choices the right way to invest that much in individual companies, in my eyes.

"I am having A LOT of emotional trouble selling these to convert to index funds. "

Then that answers it,
Convert When YOU are ready
You will know when the time is right.
Confidence in yourself and your decisions.

++1

There's the business of business.
There's finance.
There's money.'
And then there's "emotion".
Delete emotion and there's clarity, proactivity vs attachment.
Dog wagging the tail or tail wagging the dog?
As is said often here, "ignore the noise".

I'm a 60/40 37 year old who is all in on the three fund portfolio. ... My tax bracket is low this year and will probably never be this low again due to a maternity.
...
5) Any other comments from others who can share their experience who had the same "problem".

And you may actually know something that I don't: how much in capital gains can you take without a tax cost? (Make sure that you understand all of your taxes; don't take a capital gain which would cost you the earned income credit or saver's credit.)

BashDash, do you know the marginal rates (not just "brackets") you will pay as you sell various amounts of the individual stocks?

Thanks for all the thoughtful replies! I like knowing all of the options. I didn't give a lot of details but my wife and I basically have roughly 200k in tax deferred accounts; 150K in a ally 1.5% CD, and then this 114k in a merril edge brokerage account. So it is a relatively big part of our overall portfolio. My wife is on maternity leave this year so our income will probably never be this low ever again and I will be deferring close to 36k of my 100k salary this year plus I have a lot of other pretax deductions.

I am leaning towards my current plan for now of just re-investing my dividneds in VTI and VXUS. Although I am recently tempted to just sell the original amount I invested and let the rest run. Most of these purchases were made in 2008 when I saw everyone running for the hills from the market. At the time I was 27 years old.

Thanks again for any insight as I greatly appreciate it! Keep any suggestions coming

The bug to sell my few individual stocks was placed by livesoft. And he probably doesn't even know it. A while back he said something to the effect that when the market goes down he just rebalances into his index funds/ETFs because he knows they aren't going to $0. With individual stocks you do not know they aren't on their way to $0. That way of thinking really resonated with me. I don't want to worry if Apple, say, is on its way into the ground. So I told myself I would sell it right before the 8 launch. That worked out perfectly, luckily. I just sold a bank stock I owned because it was bought by another bank and thus my reason for holding it, to help a small community, was sort of over. That worked out well, again luckily. Something already has triggered you to think about selling your individual stocks and so over time I'm sure you will. If they are at a good price then just do it and don't look back.

The bug to sell my few individual stocks was placed by livesoft. And he probably doesn't even know it. A while back he said something to the effect that when the market goes down he just rebalances into his index funds/ETFs because he knows they aren't going to $0. With individual stocks you do not know they aren't on their way to $0. That way of thinking really resonated with me. I don't want to worry if Apple, say, is on its way into the ground. So I told myself I would sell it right before the 8 launch. That worked out perfectly, luckily. I just sold a bank stock I owned because it was bought by another bank and thus my reason for holding it, to help a small community, was sort of over. That worked out well, again luckily. Something already has triggered you to think about selling your individual stocks and so over time I'm sure you will. If they are at a good price then just do it and don't look back.

Tony this is why I love BH. Your ETF comment is so simple yet I never thought of that! I now need to look into what my marginal tax rate is going to be if I want to make the switch. I stopped DRIP this spring for all stocks. Is it possible to make a "clean" tax free switch to index ETF if I am in 15% tax bracket? I think I have a lot of room in there this year with my wife not working. If I want to make room I guess I can seriously increase my deferrals until the end of the year. I am close to am if my 457 for this year but I think I have around 9k more room in my 403b that is low cost now thanks to BH helping me kick the Voya variable annuity to the curb.

All your individual stocks are in the Total US and Total International indexes at their cap weight.

You picked individual stocks that did well during this (quite amazing) 8 year bull run where virtually all stocks have gone up. Is that skill, luck, riding the wave?

If your gains are big enough, you are already somewhat trapped by those gains. Paying tax on big gains feels like giving back some of those gains. You can either pay the tax or "hope" that the shares go down and you don't have the gain. That strategy seems strange too.

Keep what you have. If you get an itch to buy stock xyz, buy the Total US or International stock index. It is in there.

"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

All your individual stocks are in the Total US and Total International indexes at their cap weight.

You picked individual stocks that did well during this (quite amazing) 8 year bull run where virtually all stocks have gone up. Is that skill, luck, riding the wave?

If your gains are big enough, you are already somewhat trapped by those gains. Paying tax on big gains feels like giving back some of those gains. You can either pay the tax or "hope" that the shares go down and you don't have the gain. That strategy seems strange too.

Keep what you have. If you get an itch to buy stock xyz, buy the Total US or International stock index. It is in there.

Thanks Bloom for the reply. I really don't think I had any skill in my purchases. In 2008 I just had a good feeling it was a time to buy. I just want to make sure I am not being arrogant in holding on to them. Luckily, I don't feel the urge to buy any more individual stocks. I am currently researching if I can do a clean tax free switch to index funds.

Update. Step 1 for me was to sell enough stock in my positions to get my original investment back. I guess I am essentially playing with the houses money. All of this should not have any taxes taken out of it given my current tax bracket. For some reason, I could not sell any of the Home Depot, Berkshire, Visa, Mastercard, Waste Management,and Apple. I guess I am stubborn.

I now am faced with the decision of what to do with the 20k just generated. I don't feel like DCA so I will probably just pick a down day on the next month or two and toss it in VTI and VXUS. Other option would be to just spend it and load up more of my 403b/457 accounts.

Thanks again for all of your help. I didn't reply to all who helped as I just learned how to do the quote feature but thank you!

I too am an Apple fan. It was emotional for me to sell too. However, I decided I wanted diversity more than a single stock. I own plenty of Apple in total stock market. You just won't see the ticker in Your portfolio. I made good money ob Apple, but I wanted to get out while the getting is good.. sell while it is up.

You didn’t say anything about Roth IRA funding. Consider maxing out Roth contributions for both you and spouse funded by at least a partial sale. Or convert some. Seems appropriate if you are in a low tax situation this year. At 64 and just retired, I wish I had more in Roth vs IRA to provide flexibility and am considering some conversion. (maybe wait and see what kind of tax legislation is passed, if any. You have till 15 Apr next year)